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Rooted to scale, built to compound

Superior growth with industry-leading RoE

* ICICI Prudential AMC (IPRUAMC) is India's second-largest asset management company and a clear leader in the active mutual fund QAAUM (13.5% market share and INR9.1t QAAUM as of Dec'25). Since inception in 1998, the company has built a scaled, diversified, and consistently profitable asset management platform, jointly promoted by ICICI Bank (~53%) and Prudential Corporation Holdings (~35%).

* IPRUAMC is well-positioned to benefit from structural expansion of India's MF industry. As the largest AMC by active QAAUM (13.5% share), it stands to gain from expected growth in MF QAAUM, which is projected to expand at ~17% CAGR over FY26–28E, supported by rising financialization and improving retail participation.

* The company has delivered sustained fund outperformance, with over 80% of AUM in the top two quartiles (on a one-year basis) since Apr'25 (~67% as of Feb'26) and more than 50% in the top two quartiles (on a three-year basis) since Dec'23.

* Yields remain among the best-in-class, with equity/debt yields at ~67bp/~32bp (3QFY26). Stability in yields, despite telescopic TER structures and a higher AUM base, is supported by a stable equity mix, strong performance, and disciplined distribution.

* Backed by ICICI Bank and Prudential Corporation Holdings, IPRUAMC benefits from a strong banca partnership (~76% share of the bank’s MF sales) while maintaining moderate dependence on the channel (ICICI Bank ~8.1% of equity AAUM in 3QFY26). A diversified mix—Banca 19.2%, MFD 37.3%, ND 15.5%, Direct 28%— supports resilient flows.

* IPRUAMC has diversified beyond mutual funds, with non-MF revenues rising to ~15% in FY25 (vs. ~7% in FY20) and expected to remain stable. With continued traction in PMS, AIF, and new SIF launches (iSIF), IPRUAMC is well-positioned to deliver superior core earnings growth vs peers.

* Valuation and view: We expect IPRUAMC to deliver a FY26-28 revenue CAGR of ~15%, driven by sustained equity and systematic investment plan (SIP) inflows, improving product mix toward higher-yielding non-MF assets, and operating leverage. We expect EBITDA margins to sustain above 70% and core PAT to expand at ~16% CAGR over FY26-28. We initiate coverage with a BUY rating and a one-year TP of INR3,500, based on 42x FY28E Core P/E.

MF industry well-positioned to witness structural long-term growth

* Robust economic growth: India is expected to remain one of the fastestgrowing major economies, supported by strong domestic consumption and relatively lower reliance on global demand.

* Mutual fund AUM as a % of GDP rose to ~21% in 1HFY26 from 7% in FY14, yet penetration remains well below developed and fast-growing peers (world average at ~64-182%), indicating significant headroom for structural growth.

? Household allocation to MFs rose to ~12% in FY25 (from ~8% in FY22), with inflows rising ~95% in FY24–25. However, penetration remains modest at ~9–10% of financial assets vs higher double-digit for global peers, implying strong growth headroom. ? MF penetration is steadily improving, driven by regulatory initiatives(SEBI’s mandatory 2bp investor education spend), EPFO’s ETF allocations, SIFs, MF Lite framework, and industry campaigns like ‘Mutual Funds Sahi Hai’.

* Retail participation continues to strengthen, led by rising mobile penetration and increasing number of fintech brokers, with individual investors’ share (retail & HNI) in total MF AUM rising to 60% in Feb’26 from ~53% in Feb’20.

IPRUAMC’s consistent fund performance supports sustained flow momentum

* IPRUAMC has delivered consistent improvement in fund performance across key time horizons, reinforcing its competitive positioning among listed asset managers. On an AUM-weighted basis, over 80% of assets have remained within the top two quartiles on a one-year basis since Apr’25 (~67% in Feb’26), while more than 50% of AUM has ranked within the top two quartiles on a three-year basis since Dec’23, reflecting the stability of its investment processes.

* At the scheme level, IPRUAMC stands out as the only listed AMC with a doubledigit number of schemes in the top quartile across both one-year and three-year return horizons, with 11 schemes in 1Q on a one-year basis and 12 schemes in 1Q on a three-year basis as of Feb’26.

* As equity participation in India continues to deepen, we believe IPRUAMC’s improving performance track record positions it well to capture incremental retail flows.

Stable yields led by higher equity mix

* IPRUAMC continues to maintain one of the highest revenue yields among listed AMCs led by strong product mix, disciplined distribution strategy, and strong performance. In 3QFY26, equity and debt yields stood at ~67bp and ~32bp, as indicated by management, among the highest in the industry.

* Importantly, the company has sustained yields over the past years despite the telescopic TER structure, even as several peers have seen gradual yield compression due to shifts in product mix. A higher share of active equity AUM and strong retail participation have supported yield resilience.

* Going ahead, as the industry expands and operating leverage improves, stable yields should support sustained margin strength and earnings visibility.

Strong parentage backing and diversified distribution supporting scalable growth

* IPRUAMC benefits from strong sponsor backing from ICICI Bank (53% stake) and Prudential Corporation Holdings (35% stake) as of Dec’25, providing both distribution reach and institutional credibility. The partnership with ICICI Bank offers access to a large retail customer base via 7,385 branch networks (Dec’25) and an integrated digital distribution ecosystem, while Prudential’s global investment expertise strengthens investment processes and governance standards.

* IPRUAMC has built a well-diversified distribution platform, reducing reliance on any single channel. As of Dec’25, the equity AAUM distribution mix comprised MFDs (37%), direct channel (28%), banca (19%), and national distributors (16%), highlighting the breadth of its distribution network.

* Importantly, ICICI Bank contributes only ~8.1% of equity AAUM, indicating meaningful headroom for incremental penetration. As mutual fund penetration expands beyond metro markets and digital distribution deepens, this diversified distribution architecture positions IPRUAMC well for sustained AUM growth.

Best-in-class profitability and capital efficiency

* The asset management business is inherently capital-light, and IPRUAMC has emerged as one of the most profitable players in the listed AMC universe. Over FY23-25, mutual fund AAUM, operating revenue, and PAT expanded at ~32% CAGR, reflecting strong operating momentum and industry tailwinds.

* In 9MFY26, operating revenue increased 24% YoY to INR42.5b, supported by stable yields and a higher equity QAAUM mix (~59.4% as of Dec’25), while PAT rose ~29% YoY to INR25.3b. Profitability metrics remain robust, with EBITDA margins above 70% and PAT margins above 50%, among the highest in the sector. Return ratios are also a key differentiator, with RoE of ~82% in FY25, significantly ahead of most listed peers.

* Looking ahead, we expect revenue and core PAT to expand at ~15–16% CAGR over FY26–28E, supported by continued industry expansion, operating leverage from rising AUM, and stable revenue yields. The company’s strong cash generation and capital-light model also support a high dividend payout profile, enhancing shareholder returns.

Diversified product platform strengthening the non-MF revenue mix

* IPRUAMC has progressively diversified its product platform beyond traditional mutual funds by scaling its alternatives and advisory businesses, including PMS, alternatives, and offshore mandates. As a result, non-mutual fund revenues have increased to ~15% of total revenue in FY25 from ~7% in FY20, reflecting growing traction in higher-yield products.

* The expansion of India’s high-net-worth investor base and rising allocation toward alternative assets are expected to drive continued growth in this segment. With ongoing traction in alternatives and new product launches such as SIFs, the company is well-positioned to further strengthen its revenue mix.

* We expect mutual fund QAAUM to expand at ~17% CAGR over FY26-28, while higher-yield non-MF businesses should support blended yield stability and earnings diversification.

Valuation and view

* IPRUAMC remains well-positioned to benefit from India’s structural financialization theme, aided by a strong brand franchise, diversified product mix across equity, hybrid, debt, and passive segments, and a steadily expanding retail and SIP investor base. Continued growth in retail participation and systematic flows should support steady AUM expansion over the medium term.

* While near-term flows may remain market-linked, the company’s balanced AUM mix and diversified distribution provide relative earnings resilience across cycles. The inherently asset-light AMC model, combined with strong operating leverage, supports sustained margin strength and cash generation as incremental AUM scales over a largely fixed cost base.

* Healthy return ratios, consistent dividend payout, and a gradual shift toward higher-yielding retail equity assets and alternatives support steady earnings compounding and strong shareholder returns.

* We expect IPRUAMC to deliver ~15% revenue CAGR over FY26–28, driven by sustained equity/SIP inflows, improving product mix, and operating leverage, with EBITDA margins sustaining above 70% and Core PAT expanding at ~16% CAGR over the same period. We initiate coverage with a BUY rating and a oneyear TP of INR3,500, based on 42x FY28E Core P/E.

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